stock market crash

Is the Bull Market Over? These Charts Say So

For weeks we have been warning not to trust the bounce in stocks. We were worried that a Bear Market had begun.

The most critical item we were concerned with was the fact that the S&P 500, despite its massive bounce, had failed to regain its former trendline. This would suggest a Bear Market was possibly about to begin

As we first noted back in early September, Bear Markets do not happen all at once. EVERY time a major top has formed and stocks have taken out their Bull Market trendline, we’ve had a bounce to “kiss” the line before the Bear Market really took hold.

sc 8.41.39 PMThis is precisely what has happened with the October bounce: stocks rose to “kiss” the former trendline, but failed to reclaim it.
123151Having failed to reclaim this line twice, the S&P 500 is now turning sharply down. The financial media sees this as a reaction to ECB President Mario Draghi’s failure to do “enough” this morning, but the reality is that this was not to be trust, driven primarily by manipulation with little carry through from REAL buy orders.

In the near term stocks could crater to 1900 in short order. However, what happens in the next few days or even weeks is not the real concern.

The REAL concern pertains to the BIG PICTURE for the markets: the massive monthly rising wedge pattern stocks have been forming since the 2009 bottom.

As you can see in the chart below, the August-September collapse broke this formation. That, in of itself, is not the be all end all. But the fact that stocks have failed to reclaim their former bull market trendline is a MAJOR concern indicating that it is highly likely that the bull market begun March 2009 is OVER. A Bear Market will have begun.

sc-1 12.31.10 PMIf this is the case, the next Crash has already begun. This would put us at the equivalent of where the markets were in late 2007: just before the whole mess came crashing down in 2008.

Smart investors are preparing now. The August-September correction was just a warm up. The REAL drop is coming shortly.

We just published a 21-page investment report titled Stock Market Crash Survival Guide.

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

We are giving away just 1,000 copies for FREE to the public.

To pick up yours, swing by:

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

 

 

 

Posted by Phoenix Capital Research in stock collapse?
Six Horrifying Facts of the Financial System Today

Six Horrifying Facts of the Financial System Today

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. If the below chart was a problem BEFORE 2008… there is no way that things are better now. After all, we’ve just added another $10 trillion in debt to the US system.

Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

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So here are the facts:

1)   The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2)   The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

3)   Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4)   Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5)   The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6)   The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work.  They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central Banking itself will fail.

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Posted by Phoenix Capital Research in stock collapse?
Central Banks Will Not Be Able to Halt This Economic Collapse

Central Banks Will Not Be Able to Halt This Economic Collapse

In 2008, the world experienced the worst economic collapse in 80+ years. This collapse triggered a stock market crash that erased $30 trillion in wealth.

Since that time, collectively Central Banks have cut interest rates over 600 times and have printed over $15 trillion in new money… money that has failed to generate sustained economic growth… money that has set the stage for another stock market crash.

Consider the measures of GDP growth in the US for instance.

The mainstream media likes to present the “official” GDP numbers as though they are gospel… but the reality is that the number you hear in the press is not even close to accurate.

One of the simplest means of hiding the real economic collapse is to use a bogus measure for inflation. If GDP growth is 10%, and inflation is 10%, then real GDP growth is 0%.

But what if GDP growth is 10%, real inflation is 10%, but you claim inflation is just 6%?

Boom! You can promote GDP growth of 4% to support your claim that printing trillions of dollars has boosted the economy.

To remove this accounting gimmick, you can use Nominal GDP and look at the rate of growth from a year ago. Doing this presents a VERY different view of the economy: one of economic collapse, not growth. I’ve circled periods in which the current level of “growth” occured in the past.

-2As you can see, the “recovery” of the last six years has largely involved a “growth” rate that was closely associated with recessions over the last 30 years. At best the US economy has been flatlining. At worst we’ve had bouts of economic collapse comparable to a recession.

Also, note that the previous periods in which we’ve experienced this rate of economic collapse have been associated with stock market crashes.

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The media can try to hide reality all it wants. But an economic collapse is here. It will trigger another stock market crash just as it did in the early ’90s, the Tech Bubble, and the Housing Bubble. And this time Central Banks won’t be able to stop it: they’ve used up all of their ammo in the last six years trying to create recovery.

Smart investors are preparing now.

We just published a 21-page investment report titled Stock Market Crash Survival Guide.

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

We are giving away just 1,000 copies for FREE to the public.

To pick up yours, swing by:
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Best Regards

Graham Summers
Chief Market Strategist
Phoenix Capital Research

Posted by Phoenix Capital Research in It's a Bull Market
One by One Central Banks Are Losing Control

One by One Central Banks Are Losing Control

Since 2008, the Keynesians running global Central Banks had always suggested that there was no problem too great for them to handle. They’d promised to do “whatever it takes,” to maintain the financial system and print the world back to growth.

Thus far, we’d seen some pretty aggressive moves. The most aggressive was committed by the Bank of Japan, which announced a single QE program equal to 24% of Japanese GDP in April 2013.

However, the SNB was the first Central Bank to actually reach the point at which it had to decide between printing a truly insane amount of money relative to GDP (50%+) or simply giving up.

It chose to give up.

In many ways, the SNB was cornered by the ECB into this situation. I think this is why the SNB decided to make its announcement on a Thursday as opposed to over the weekend (when Central Banks usually announce bad news to minimize the market impact). The SNB wanted to cause mayhem, likely because it was frustrated by the ECB’s upcoming QE program of which the SNB was undoubtedly aware in advance.

This situation has since progressed with an even larger, more important Central Bank buckling to market forces.

That Central Bank is China.

As we’ve noted before, China’s economy is in tatters. At best it is growing around 3.5%. At worst it isn’t growing at all. And with its currency closely linked with the US Dollar (which is in a bull market) Chinese exporters were getting destroyed.

So what did China do? It chose to devalue the Yuan.

In short, a new player is in the global currency war. And it represents the second largest economy in the world. Having said that, we want you to take note of a few lessons from this situation:

  • There are in fact problems that are too big for Central Banks to manage.
  • Central Banks are in fact individual entities. True, they try to coordinate their moves, but when push comes to shove, it will be each Central Bank for itself. This trend will be increasing going forward.
  • Central Banks have no problem lying about the significance of a situation right up until they shock the market (both the SNB and the PBOC’s moves were suddenly announced).

Of these, #1 is the most important. Since the mid-‘80s, the general consensus has been that there is no problem too great that Central Banks cannot fix it. This has been the case because most crisis that have occurred during that period were either isolated to a particular market (Asian Crisis, Latin American Crisis, Russian Ruble Crisis, etc.) or a particular asset class (Tech Bubble, Housing Bubble, etc.).

This situation has resulted in less and less volatility in the financial system, combined with increased risk taking on the part of investors. As a result, the necessary deleveraging has never been permitted to occur and the financial system has become increasing leveraged (meaning more and more debt).

You can see this in the below chart revealing total credit market instruments in the US (this only includes investment grade bonds, junk bonds, and commercial paper). The deleveraging of the 2008 crisis which nearly took down the entire financial system was a mere blip in a mountain of debt (and this doesn’t even include US sovereign debt, emerging market debt, derivatives, etc.).

Today, when you include global debt issuance, we are facing a debt super crisis, the likes of which has never existed before: $100 trillion in global bonds, with an additional $555 trillion in derivatives.

Central Banks, by printing money, began a war of competitive devaluation in 2008. This worked fine when they were coordinating their moves to prop the system up from 2009-2011. We even had some coordinated efforts by the Fed and the ECB to push the markets higher in 2012 in order to benefit President Obama’s re-election campaign.

However, 2012 marked the high water mark for Central Bank intervention without political repercussions. From that point onward, all Central Bank began to lose their political capital rapidly.

  1. In Japan, the Bank of Japan’s policies are demolishing the Middle Class. The number of Japanese living on welfare just hit a record and real earnings and household spending have been in a free fall since the middle of 2014.
  1. In Europe, the ECB’s President Mario Draghi has admitted in parliament that he was concerned about a “deflationary death spiral” and admitted that QE was the last tool left. Half of the ECB’s Board is against his direction.
  1. In the US, the Fed is now being targeted by Congress. Legislation has been introduced to audit the Fed AND force it to abide by the Taylor Rule.
  1. In China, deflation is spiraling out of control with a stock market crash, housing bubble bursting, and economic downturn that is more serve than most realize.

The significance of these developments cannot be overstated. Central Banks will be increasingly acting against one another going forward. There will more surprises and more volatility across the board. Eventually it will culminate in a Crash that will make 2008 look like a picnic.

Smart investors are preparing now, BEFORE it hits.

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Posted by Phoenix Capital Research in It's a Bull Market